Insurers business model

Profit = Earned premium + Investment income - Incurred loss - Underwriting expenses. Insurers make money in two ways: (1) through underwriting, the process by which insurers selects the risks to insure and decide how much in premiums to charge for accepting those risks and (2) by investing the premiums they collect from insureds. he most complicated aspect of the insurance business is the underwriting of policies. !sing a wide assortment of data, insurers predict the likelihood that a claim will be made against their policies and price products accordingly. o this end, insurers use actuarial science to "uantify the risks they are willing to assume and the premium they will charge to assume them. #ata is analy$ed to fairly accurately pro%ect the rate of future claims based on a given risk. &ctuarial science uses statistics and probability to analy$e the risks associated with the range of perils covered, and these scientific principles are used to determine an insurer's overall e(posure. !pon termination of a given policy, the amount of premium collected and the investment gains thereon minus the amount paid out in claims is the insurer's underwriting profit on that policy. )f course, from the insurer's perspective, some policies are winners (i.e., the insurer pays out less in claims and e(penses than it receives in premiums and investment income) and some are losers (i.e., the insurer pays out more in claims and e(penses than it receives in premiums and investment income). &n insurer's underwriting performance is measured in its combined ratio. he loss ratio (incurred losses and loss*ad%ustment e(penses divided by net earned premium) is added to the e(pense ratio (underwriting e(penses divided by net premium written) to determine the company's combined ratio. he combined ratio is a reflection of the company's overall underwriting profitability. & combined ratio of less than 1++ percent indicates underwriting profitability, while anything over 1++ indicates an underwriting loss. Insurance companies also earn investment profits on ,float-. ,.loat- or available reserve is the amount of money, at hand at any given moment, that an insurer has collected in insurance premiums but has not been paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest on them until claims are paid out.

/roperty and casualty insurers currently make the most money from their auto insurance line of business. 0enerally better statistics are available on auto losses and underwriting on this line of business has benefited greatly from advances in computing. &dditionally, property losses in the , due to natural catastrophes, have e(acerbated this trend. .inally, claims and loss handling is the materiali$ed utility of insurance. In managing the claims* handling function, insurers seek to balance the elements of customer satisfaction, administrative handling e(penses, and claims overpayment leakages. &s part of this balancing act, fraudulent insurance practices are a ma%or business risk that must be managed and overcome.

Define insurance

ar!eting"

)rgani$ation that conducts research on distribution systems for the life and health insurance products on behalf of its member companies. 1tudies range from consumer attitudes towards the life insurance product to reasons for turnover of the agency field force. Insurance marketing is the direct marketing of the company products. Insurance companies use direct marketing, here the companies uses salespeople to inform the customer about their product. Insurance companies use door to door marketing. he field force is widely used in insurance marketing. #eveloping citi$en*centric programs. /romoting and enhancing citi$en participation. /erfecting on*line service delivery through analysis and evaluation, measuring efficiency, and benchmarking against other forms of service delivery. 2ake sales door to door.

#actors affecting insurance mar!eting

Insurance companies are in a uni"ue position when it comes to marketing. hey have no tangible products to sell, but must instead rely on strong relationships with loyal customers and word of mouth to help them compete. 1till, despite the challenges, the marketing strategies for insurance

companies are really no different than for any other company, and re"uire a strong focus on the basics of effective marketing. $now t%e ar!et

.irst and foremost, insurance companies must know their market. his means having a strong understanding of their target audience, their competition and the most effective ways to connect with that audience, according to 3in 0rensing*/ophal, author of 4 "uot5 2arketing 6ith the 7nd in 2ind.4"uot5 8ompetition is fierce, but service organi$ations like insurance agencies that thoroughly understand the needs and concerns of their target audience can effectively motivate that audience to connect with them. Establis% a Plan 1uccessful marketers based on their knowledge of the market, and their overall goals and ob%ectives, successful marketers identify and prioriti$e the communication strategies most likely to generate the results they need. his generally involves a combination of activities that include both traditional and new media, direct and indirect sales. easure Effectiveness It is important for insurance companies to measure the effectiveness of their marketing efforts based on the goals they have established. his may be as simple as comparing the number of clients before and after a campaign. It may also involve using online analytics to monitor website visits after launching a promotion. &at%er #eedbac! .or insurance marketers, word of mouth is key. In addition to measuring the effectiveness of marketing efforts based on "uantitative data, insurance marketers can seek input from their e(isting and new clients about their communication efforts. 6hat worked well9 6hat was unclear9 :ow might they communicate more clearly in the future9 In addition, clients can be e(cellent advocates and part of the marketing process. 1uccessful insurance marketers will take advantage of the opportunity to leverage their clients as word*of*mouth marketing advocates.